CoinTelegraph reports — On Wednesday in Asian trading, the U.S. dollar index faced strong selling pressure, dropping to 101.25 amid initial vote counts from the U.S. midterm elections, marking its lowest level since late September. Markets priced in the likelihood of Democrats gaining control of both chambers of Congress, potentially leading to policy gridlock in Washington; this prompted safe-haven flows into U.S. Treasuries, pushing yields lower and weighing on the dollar. However, the probability of a Fed rate hike in December remains above 75%, and new geopolitical tensions in the Strait of Hormuz provided support for the dollar, limiting deeper declines. Markets now await guidance from the ADP employment report, the ISM services PMI, and Friday’s non-farm payrolls data.
According to Huitong Finance APP — During the Asian trading session on Wednesday, the US Dollar Index, which measures the US dollar against a basket of major currencies, faced concentrated selling pressure and declined to 101.25, hitting its lowest level since the end of September. Early vote counts from the US midterm elections shifted market expectations, with traders beginning to price in the possibility of Democrats gaining control of both the Senate and the House. The market generally interprets that if Democrats secure control of both chambers, the US Congress is likely to face policy gridlock, significantly increasing the difficulty of advancing fiscal expansion and large-spending legislation, thereby weakening fiscal stimulus and cooling medium- to long-term growth expectations.
Under this expectation, capital has shifted toward safe-haven assets, continuously flowing into the U.S. Treasury market, causing the entire U.S. yield curve to decline. The appeal of zero-coupon U.S. Treasuries has risen, directly eroding the dollar’s interest rate advantage and becoming the primary driver behind the dollar index’s intraday weakness. However, the dollar has not moved solely lower; two key support factors have constrained short-seller opportunities, warranting caution against aggressive short positions. EMC Group’s FedWatch tool shows that the market currently prices in a probability exceeding 75% of another rate hike by the Federal Reserve in December. The JOLTS job openings data released Tuesday evening reinforced this expectation, with September job openings rising from 7.2 million to 7.5 million—significantly above market forecasts—demonstrating continued strength in the labor market. Coupled with inflationary persistence driven by energy prices, this has further solidified market expectations of Fed policy tightening, providing fundamental support for the dollar.
The geopolitical situation in the Middle East remains complex, and risk premiums have not been fully priced out. Trump publicly stated that the U.S. has no immediate plans to strike Iran, creating a clear divergence from hints of an attack conveyed by Israel’s prime minister, which had initially led markets to anticipate de-escalation. However, Iran has signaled a firm stance: senior Iranian officials declared that the Strait of Hormuz will only resume normal navigation if the U.S. lifts related sanctions and ends its maritime blockade. Simultaneously, the Islamic Revolutionary Guard Corps reported that four tankers were damaged by mines in the southern waters of the Strait of Hormuz, reigniting concerns over shipping risks. Amid conflicting signals—diplomatic hopes for de-escalation on one side and tangible disruptions to shipping on the other—geopolitical risk aversion continues to fluctuate, intermittently providing buying support for the U.S. dollar.
The short-term market rhythm will be dominated by data from the North American session, with the U.S. ADP private employment data and ISM services PMI set to be released Wednesday evening. The ADP data offers an early indication of the strength of non-farm payrolls, while the ISM services index reflects the health of U.S. domestic demand. If both figures significantly exceed expectations, they could rapidly revive expectations of Fed rate hikes, driving a rebound in U.S. Treasury yields and a recovery in the dollar. Conversely, weaker data may further open the door for dollar depreciation. In addition to economic data, developments in the post-election vote counting and any unexpected news related to the Middle East straits could trigger short-term volatility. The week’s climax remains Friday’s non-farm payrolls report, which will ultimately determine the Fed’s monetary policy path by year-end and serve as the central focus for the entire market.
On the daily chart, the US Dollar Index has recently weakened, with price testing the key support at 101.26. The RSI indicator has declined from its highs, showing a clear loss of upward momentum. The medium-term bullish structure has not yet been fully broken; if the 101.26 support holds, there remains potential for a recovery rebound. However, a decisive break below this level would open further downside space. On the 4-hour chart, the US Dollar Index remains in a short-term bearish trend, having already broken below the 4-hour 200-period simple moving average. If price continues to decline below the 38.2% Fibonacci retracement level at 101.26, the next targets are 100.75 and further down to 100.24. Stronger support levels are located at 99.51 and 98.59. Initial resistance above is at the 4-hour 200-period MA at 101.71, followed by the 23.6% Fibonacci retracement at 101.89, and a key cycle high at 102.92. Only a reclamation above 101.71 would alleviate the short-term bearish bias.
Editor's Summary
The U.S. Dollar Index experienced a sharp pullback following initial results from the midterm elections, pressured by declining U.S. Treasury yields. However, the high probability of further Fed rate hikes and ongoing geopolitical tensions in the Middle East have provided support for the dollar, intensifying the tug-of-war between bulls and bears. Short-term risks include continued downward pressure on the dollar from follow-up election news, potentially breaking key support levels. A potential opportunity lies in significantly stronger U.S. employment data, which could drive a rebound and retest resistance levels. Focus on the validity of the 101.26 support level, and closely monitor ADP, ISM, and upcoming non-farm payrolls data, as event-driven volatility is expected to be high.
Under this expectation, capital has shifted toward safe-haven assets, continuously flowing into the U.S. Treasury market, causing the entire U.S. yield curve to decline. The appeal of zero-coupon U.S. Treasuries has risen, directly eroding the dollar’s interest rate advantage and becoming the primary driver behind the dollar index’s intraday weakness. However, the dollar has not moved solely lower; two key support factors have constrained short-seller opportunities, warranting caution against aggressive short positions. EMC Group’s FedWatch tool shows that the market currently prices in a probability exceeding 75% of another rate hike by the Federal Reserve in December. The JOLTS job openings data released Tuesday evening reinforced this expectation, with September job openings rising from 7.2 million to 7.5 million—significantly above market forecasts—demonstrating continued strength in the labor market. Coupled with inflationary persistence driven by energy prices, this has further solidified market expectations of Fed policy tightening, providing fundamental support for the dollar.
The geopolitical situation in the Middle East remains complex, and risk premiums have not been fully priced out. Trump publicly stated that the U.S. has no immediate plans to strike Iran, creating a clear divergence from hints of an attack conveyed by Israel’s prime minister, which had initially led markets to anticipate de-escalation. However, Iran has signaled a firm stance: senior Iranian officials declared that the Strait of Hormuz will only resume normal navigation if the U.S. lifts related sanctions and ends its maritime blockade. Simultaneously, the Islamic Revolutionary Guard Corps reported that four tankers were damaged by mines in the southern waters of the Strait of Hormuz, reigniting concerns over shipping risks. Amid conflicting signals—diplomatic hopes for de-escalation on one side and tangible disruptions to shipping on the other—geopolitical risk aversion continues to fluctuate, intermittently providing buying support for the U.S. dollar.
The short-term market rhythm will be dominated by data from the North American session, with the U.S. ADP private employment data and ISM services PMI set to be released Wednesday evening. The ADP data offers an early indication of the strength of non-farm payrolls, while the ISM services index reflects the health of U.S. domestic demand. If both figures significantly exceed expectations, they could rapidly revive expectations of Fed rate hikes, driving a rebound in U.S. Treasury yields and a recovery in the dollar. Conversely, weaker data may further open the door for dollar depreciation. In addition to economic data, developments in the post-election vote counting and any unexpected news related to the Middle East straits could trigger short-term volatility. The week’s climax remains Friday’s non-farm payrolls report, which will ultimately determine the Fed’s monetary policy path by year-end and serve as the central focus for the entire market.
On the daily chart, the US Dollar Index has recently weakened, with price testing the key support at 101.26. The RSI indicator has declined from its highs, showing a clear loss of upward momentum. The medium-term bullish structure has not yet been fully broken; if the 101.26 support holds, there remains potential for a recovery rebound. However, a decisive break below this level would open further downside space. On the 4-hour chart, the US Dollar Index remains in a short-term bearish trend, having already broken below the 4-hour 200-period simple moving average. If price continues to decline below the 38.2% Fibonacci retracement level at 101.26, the next targets are 100.75 and further down to 100.24. Stronger support levels are located at 99.51 and 98.59. Initial resistance above is at the 4-hour 200-period MA at 101.71, followed by the 23.6% Fibonacci retracement at 101.89, and a key cycle high at 102.92. Only a reclamation above 101.71 would alleviate the short-term bearish bias.
Editor's Summary
The U.S. Dollar Index experienced a sharp pullback following initial results from the midterm elections, pressured by declining U.S. Treasury yields. However, the high probability of further Fed rate hikes and ongoing geopolitical tensions in the Middle East have provided support for the dollar, intensifying the tug-of-war between bulls and bears. Short-term risks include continued downward pressure on the dollar from follow-up election news, potentially breaking key support levels. A potential opportunity lies in significantly stronger U.S. employment data, which could drive a rebound and retest resistance levels. Focus on the validity of the 101.26 support level, and closely monitor ADP, ISM, and upcoming non-farm payrolls data, as event-driven volatility is expected to be high.